Global brands trail online in China

18 April 2014

BEIJING: Retail sales in China are growing faster than the overall economy thanks in part to the rapid expansion of online shopping, an area where global brands need to adopt a more proactive approach according to a new report.

Latest data shows that the overall economy grew at 7.4% in the first quarter compared to a year earlier. This was the slowest rate since Q3 2012, but retail sales were up 12% in the same period, which a Ministry of Commerce spokesman attributed to a boom in online shopping, increased consumption in the catering sector, and purchases of electronic gadgets and travel packages.

But the 2014 Digital Playbook, a study from GroupM Interaction, warned that many international brands continued to take a cautious stance on Chinese e-tailing, preferring to await instructions from head offices in Europe or the US, markets that trailed China in the development of e-tailing, rather than taking the initiative themselves.

It noted that online sales were predicted to take 7.5% of the total retail market in 2015 and said that within a few years that figure could rise to 50%, Campaign Asia-Pacific reported. Brands should therefore be aiming to get at least 5% of their China sales online.

A combination of factors were driving some 60m new shoppers online every year. The retail sector was, said the study, "archaic and inefficient" in the major cities while it had not yet arrived at scale in lower tier cities. Physical shoppers also faced the problems of pollution, a lack of parking and long queues.

Online shopping, however, offered better prices, a greater selection and the facility to buy direct from brands and so avoid counterfeit goods.

"It suits the connected-ness and impatience of modern consumers who might discuss something at a dinner party and pull out their phones to buy it right there and then," said the report.